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Is The National Iranian Oil Company Going Bankrupt? – OpEd

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After forty miserable years of the so-called Islamic Republic (IR) and more than 1.8 trillion dollars of oil income, Iran’s oil and gas infrastructure has basically become ineffective and is suffering from poor management, chronic corruption, and sanctions. As a result, the well-respected healthy national oil company, with a 6.3 million b/d crude production prior to the Islamic revolution, plunged to a near bankrupt industry with barely above 3 million b/d production for a short time, and around 2 million b/d production in the current year.

In the few days before the Islamic regime’s celebration in February for forty years of its existence, according to the National Iranian Oil Company’s (NIOC) news journal (Shana), the Research Center of Islamic Parliament reported that the “NIOC to the end of Iranian year March 21, 2019 owed about $48 billion, and currently the NIOC is spending from savings.”

Iran's oil infrastructure. Source: EIA.
Iran’s oil infrastructure. Source: EIA.

However, considering that more than 80% of the country’s budget in the last forty years has been from exporting oil, gas and petroleum products, these problems and the sanctions on exporting Iranian oil and gas could have very serious negative effects in a country with over 80 million inhabitants.

Iranian Oil Industry Before 1979

The Iranian petroleum industry was a very effective and respectable organization before the so-called Islamic revolution in Iran in 1979. In the monarchical regime, the NIOC was properly run and operated well not only domestically, but also managed international investment and operation. The NIOC was operated efficiently in all sectors of the industry, from upstream exploration to production, petrochemical, and natural gas to downstream refining and domestic marketing.

The NIOC was very active and aggressive in the marketing sector, including the export of massive amounts of gas to Europe. It was also first among the OPEC member states to enter into overseas downstream activities by establishing joint venture refining and marketing operations in South Korea, the Republic of South Africa, India, and Senegal. The NIOC was aggressively pursuing similar ventures in Europe and North America; it was jointly active with British Petroleum in the North Sea, and a tentative agreement was signed that the NIOC enter US markets to refine crude and distribute petroleum products in fifty states.

The stability and the political and economic power of Iran was fully recognized by the world and certainly by the OPEC member countries, in particular by her neighbors in the greater Persian Gulf. Iran enjoyed a striking position of leadership and great influence in the decision making process of OPEC. No major policy would have been adopted in ministerial conference of OPEC without the support and blessing of the Iranian leadership.

Therefore, Iran’s once-prosperous oil and gas industry certainly has suffered tremendous setbacks since the so-called Islamic revolution. Iran prior to 1979 was the world’s fourth largest oil producer and the second largest oil exporter. The country had eleven large and well-maintained refineries in operation and two more near completion, giving Iran the ability to both satisfy domestic needs and export generous quantities. Now, since the end of the UN sanctions in 2016, the Islamic Oil Ministry has on several occasions announced that the NIOC has identified numerous political oil and gas projects that would require 200 to 500 billion in investment funds before the year 2020.

Massive Deterioration Of The Iranian Oil Industry

Iranian output has reached a plateau for some time now, and production has been on the wane by over 200,000 b/d/year for the past decade. Pressure dropping in reservoirs and continuous year-to-year decline in production appear to have been triggered by long periods of technical constraints on operation and by natural aging of the Iranian oil fields. All these mean that they will never produce as they once did.

Deprived of technological advancements, outside investment, and transparent management, the industry is in a state of advanced decline and definitely requires immediate attention. However, the lack of regular maintenance and application of new technology, and particularly extensive neglect of the fields in the last several years under sanctions have resulted in further damage to the Iranian reservoirs.

Geologically, high degradation of reservoirs can take place while wells have been shut-in or declining in production. This condition is exacerbated if gas injection has not been performed on reservoirs for a while. According to the US EIA, the NIOC needs to inject at least 260 million cm of gas daily to its matured oil fields. But in recent years the NIOC has never had the capability to inject more than half of this volume per day, and currently, since the production of gas is hardly even equal to domestic consumption, no gas remains to be injected.

Therefore, the EIA concludes that old Iranian oil fields are naturally losing pressure, which has caused 8 to 13 percent less oil production to date. However, the majority of power plants in the country use liquid fuel due to scarcity of gas, which further pollute the air drastically and make it unbearable. According to the International Health Organization, damages resulting from oil pollution in Iran cost $16 billion annually.

IR Advocates International Terrorism Worldwide By Country’s Oil Income

The IR is a regime of terrorism, one that puts effort toward destabilizing Middle Eastern countries and aids international terrorist groups. The US State Department in its annual report on worldwide terrorism continuously claims that the IR regularly financially supports militant groups in Iraq, Syria, Lebanon, and Gaza, and also continuous “subtle efforts at growing influence” in Asia, Africa, and South America.

The US State Department periodically discloses the issue of human rights in the world and says that the IR is repeatedly in the second place in the number of executions in the world after China. However, the IR would be first place if one adjusts for the difference in population size between the two countries.

Contrary to the opinion of some European countries which claim that lifting sanctions by the US will boost the Iranian economy and consequently improve the behavior of IR officials, lifting sanctions will mainly increase the clergies’ income and their influence over politics and the state’s economy. Obviously, ending sanctions also will strengthen the IRGC and the dictatorial establishment. The result would be more terrorism, more missiles, proliferation of nuclear weapons and instability in the region and the world.

The IR has been promoting international terrorism and domestic genocide, and oil revenues are making these programs possible. Sanctions or no sanctions, the IR will continue to commit atrocities.

Who Owns The Petroleum Industry In Iran

The IRGC has been notorious for its involvement in terrorist activities and its control of major sectors of Iran’s economy. The US State Department for the first time listed the NIOC as an entity of the IRGC in June 2015. Further, it is an industrial empire with political clout that has grown exponentially since the establishment of this regime in Iran.

Iran's IRGC. Photo Credit: Tasnim News Agency
Iran’s IRGC. Photo Credit: Tasnim News Agency

The IRGC essentially is the owner of the most lucrative parts of Iranian industry including the country’s major source of income, the oil, gas, and petrochemical industries. Khatam al-Anbiya, the economic and engineering arm of the IRGC, operates almost all industrial segments in the country with substantial political control and influence on governing groups.

The IRGC currently owns and runs absolutely all major entities in the country including banks, transportation, industries, mining, the NIOC and all its affiliated branches, pipelines, production complexes, and drilling rigs. Unbelievably, it was awarded the task of developing parts of the giant South Pars gas field in 2011 after international oil companies left Iran due to the first sanctions, and was also contracted to build a 1.3 billion dollar gas pipeline, known as the Peace gas line from the giant South Pars gas field to west Pakistan.

Presently with billions of dollars at hand, the IRGC is very active in smuggling banned commodities across the Persian Gulf, transferring money to terrorist groups in neighboring countries and the proliferation of weapons of mass destruction. Further, the terrorist acts abroad are carried out by an elite arm of the IRGC, the “Quds Force.”

The IRGC is the only power structure of the IR that answers to no one and sees itself as the sole defender of the Islamic ideology and only organization to protect the so-called Islamic revolution, meaning the regime. Rightfully, President Trump’s administration formally announced in April that it is designating the IR’s IRGC, the regime’s paramilitary fighting force, as a terrorist entity. Among many justifications for designating the IRGC as a terrorist entity, one should remember the IRGC’s proxies are responsible for the death of 608 US troops in Iraq during President Obama’s second term.

*Mansour Kashfi, Ph.D. is president of Kashex International Petroleum Consulting and is a college professor in Dallas, Texas. He is also the author of innumerable articles and books about the petroleum industry and its market behavior worldwide. [email protected]

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One thought on “Is The National Iranian Oil Company Going Bankrupt? – OpEd

  • Avatar
    June 10, 2019 at 9:56 am
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    Years of sanctions/attacks from an imperial global superpower will do that to any entity.

    Reply

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